It's mid-December on the calendar, and for millions of career professionals, that means year-end bonuses are on the way.
While exact figures are hard to come by, Seattle-based Pay Scale says 81% of "top performing" companies issue year-end bonuses. This means that the better businesses do, the higher the odds you'll get a fatter paycheck at the end of the year. That's not exactly a novel concept but one that explains who gets a bonus and who does not.
The big question for employees who do earn a bonus is simple - what to do with it? Ask a financial expert, and the responses usually focus on saving, investing and paying off debt.
"The best thing to do with a year-end bonus is to deposit the money in an online bank account," says Ken Tumin, banking expert at DepositAccounts.com. "This gives you time to decide how much to save, how much to invest and how much to spend. The money is completely safe and liquid while earning interest that's much higher than brick-and-mortar checking and savings accounts."
The biggest mistake? You guessed it - squander the money. "Spending your bonus without reviewing your financial needs and goals is the worst thing you can do," Tumin adds.
Boosting household savings comes up high on the list of "best" holiday bonus moves among money management gurus.
"Year-end bonuses really are a gift, and that can really help give you some financial freedom" says Angela Copeland, a career coach at Copeland Coaching, in Memphis. "The best way to give yourself that freedom is to have a six- to twelve-month emergency fund at home. If worst came to worst, you know you'd be O.K. if you needed to leave your job. The emergency fund should live in a savings account, where it is protected from fluctuations in the economy."
Not enough people do that with their extra workplace cash, says Copeland. "I often see job seekers get a big raise or bonus," she says. "Very quickly, they buy a bigger house, or a nicer car. It ties their hands completely and gives the company control over their future decisions, when the employee should have that control."
Consider the stocks market, too. Investing the cash in the stock market puts your bonus check right to work for you, and that's a better option than a bank savings account, others say.
"You are better off making that money work harder for you by investing it," advises Sallie Krawcheck, founder of Ellevest, in New York.
The stock market has historically returned an average of over 9%, and bonus recipients need to know what that really means, Krawcheck says. "Let's say you don't invest that $1,000 bonus," she notes. "That means you could miss out on tens of thousands of dollars over a lifetime. Or more specifically, you could, at minimum, double that $1,000 in ten years for doing absolutely nothing. Investing regularly in a diversified portfolio is a better long-term strategy than just saving that money in a low-interest account."
Paying down debt is a popular option, too, with financial professionals - that helps clear the path for more income generation once the debt is paid.
"Pay yourself first," says Craig Bolanos, CEO of Wealth Management Group, in Barrington, Ill. "Use 75% of the bonus to service any unsecured debt such as credit cards and student loans - just don't get accustomed to racking up credit card debt and counting on the bonus to take care of it every year."
If you don't carry unsecured debt, invest the money in a low-cost, tax-efficient exchange traded fund for future growth," he adds. "Then, take the remaining 25% and reward yourself. After all you earned the bonus, so why not take the family on a vacation and create some lasting memories so they understand why you work so hard?"
If you really can't make up your mind, other money specialists advise splitting up the year-end bonus cash further, and cover several key personal financial areas in the process.
"Divide it into three categories," says Jordan Gales, a financial advisor with JMC Wealth Management in Chicago. "Put one-third aside for debt reduction, one-third aside for future savings, and one-third for spending."
Gales says that financial consumers too often live in the past, whereas it's better to look toward the present and the future in critical areas like personal debt or retirement savings.
"Part of smart financial decision making is to learn how big financial decisions effect our emotions," he says. "By balancing them, we create the emotional stability needed to avoid future errors and feel satisfied with the financial route our lives are headed."
Consequently, weigh all of the above considerations when you're mulling over a financial strategy with a year-end bonus. Since you never know if you'll get one in 2017, make the right decision this year to maximize the extra workplace income.